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Inflation rate unchanged at 0.6% in August

Inflation remained unchanged at 0.6% in August, official figures show.

Economists had expected a slightly higher reading of 0.7% after the fall in the pound pushed up import prices.

But the Office for National Statistics (ONS) said that while raw materials were becoming more expensive, there was little sign of this feeding through to consumers.

The Consumer Prices Index (CPI) measure of inflation remained the same as it was in July.

But experts think it will turn higher in the months to come and rise above 2% next year.

Martin Beck, senior economic advisor to the EY ITEM Club, said: "There were signals in today's data that the only way for inflation in the near future is up."

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Official figures for August showed petrol, food prices and air fares all pushed inflation higher.

But this was balanced out by a downward effect from the prices of hotel stays, wine and clothing.

Meanwhile the ONS said a separate measure of input prices - the cost of raw materials and fuel used by UK manufacturers - showed a rise of 7.6% in August compared to last year.

That was up from 4.1% in July, following an increasing trend in recent months.

The rise in import prices is squeezing some retailers because they fear passing on the increase to customers in a competitive market.

That means that they must take a hit to their profit margins.

The latest figures came as Tim Steiner, boss of online retailer Ocado warned it faced "continuing margin pressure" in the competitive market with no sign of this easing in the short term.

Meanwhile, Primark owner Associated British Foods (LSE: ABF.L - news) said on Monday that it was facing a coming profit squeeze thanks to the fall in the pound.

Inflation hovered close to zero for most of 2015 largely thanks to the plunge in the world price of oil.

It has started to edge higher in recent months but is still well below the Bank of England target of 2%.

The Bank has cut interest rates to a record low to try to cushion the economy from the effect of the Brexit vote.

But officials will have to watch closely to make sure that its stimulus efforts do not cause too much of an upward spiral in the cost of living.

Howard Archer, chief UK and European economist at IHS Global Insight, said the stabilisation of inflation was "highly likely to prove a temporary respite" with CPI set to head above 2% next year.